How the Low Income Housing Tax Credit Process Affects Access to Jobs, Good Schools and More

RESEARCH :  Nov. 28, 2017 HOUSING

States have a lot of discretion over how the tax credits get awarded to developers. A new report considers how that works out for Houston.

Graphic of Houston skyline and houses in the background

States have a lot of discretion over how the tax credits get awarded to developers. A new report considers how that works out for Houston.

In Houston, roughly 37 percent of homeowners and renters spend more than 30 percent of their income on housing costs, according to 2015 estimates from the Census Bureau. That bar is often used as a measure of affordability and Houston, like many other cities across the country, is facing a shortage of affordable housing.

While housing choice vouchers can put existing rental units within reach for low-income residents, the low income housing tax credit (LIHTC) program is the largest program for actually building new or preserving old affordable housing. Still, the program often provides a fraction of what is needed. And states have significant discretion in how the tax credits get awarded to developers.

When Texas tweaked its scoring criteria, or qualified allocation plan (QAP), for 2017 proposals, including the tie-breaking Opportunity Index section, affordable housing advocates worried it would reverse recent gains that helped put more low-income housing in wealthier, less segregated neighborhoods than had been seen historically. Indeed, a new report from the Kinder Institute found that the scoring changes did dilute some of the criteria that prioritized locating projects in so-called "high opportunity areas" under the 2016 criteria but that under both the 2016 and 2017 scoring criteria, the average poverty rate in areas that qualified for all seven of the Opportunity Index points was "significantly lower" for areas with existing tax credit developments.

"The assumptions behind the selection process matter," said Dian Nostikasari, a staff researcher at the Kinder Institute and lead author of the report. "It changes the definition of what is considered high opportunity."

Though the stakes of such conversations are often presented in legal terms — the state wound up in the Supreme Court in a landmark 2015 decision on fair housing and Houston has an unresolved fair housing violation on the books — the impact falls directly on the residents of such projects.

For example, under the 2016 guidelines, for a project to qualify for any of the coveted seven points within the Opportunity Index it had to first be located in a census tract with a poverty rate below 15 percent. In 2017, that threshold was bumped up to 20 percent and developers could choose from a range of menu options to boost the final Opportunity Index score by locating near a public park, grocery, transit or other amenities. The 2017 guidelines also removed educational quality from the scoring rubric under the Opportunity Index.

The researchers mapped areas eligible for the full seven points under the 2017 Opportunity Index guidelines using two scenarios. In the first, the proposed project met the criteria for the poverty rate, income, proximity to child care, grocery stores and public transportation. In the second, the proposed project instead met the poverty rate, income, educational attainment and proximity to college and health facilities criteria. Comparing them to the areas that qualified for the maximum number of Opportunity Index points in 2016, the researchers found that the 2017 scoring system "expands the geographic areas that qualify for higher points and provides a greater chance for less affluent neighborhoods to receive full points under the Opportunity Index," according to the report, co-authored by Kyle Shelton, Director of Strategic Partnerships at the Kinder Institute and Taylor Morin, a Rice University student and research assistant with data contributions from Kelsey Walker, an associate with Traffic Engineers and former researcher with the Kinder Institute.

At the time, the changes were meant to open up more areas for potential development through the program, including in traditionally underserved areas. But Charlie Duncan, a fair housing planner with the Texas Low Income Housing Information Service told the Urban Edge that it wasn't just the Opportunity Index that restricted where projects could go. "...a lot of those areas that do meet the criteria, and would be competitive, are roped off because of local opposition — and that’s the real big issue that needs to be tackled before we start rolling back these opportunity criteria that have been so effectual," said Duncan.

Amid debates about whether residents would benefit more from the often more-resourced wealthy neighborhoods that have pushed back against affordable housing projects or from the development of affordable housing in long underserved areas, Nostikasari said the scoring criteria are just one part of the equation and that projects should be thoughtfully approved to balance access to opportunity and investment in revitalizing neighborhoods.

"Affordable housing is overall a shortage in the region, it's not just in lower income areas or traditionally disadvantaged neighborhoods," said Nostikasari. "Being more deliberate in thinking about locating future affordable housing or supporting future proposals and how it connects to economic mobility, how it can allow residents to access important services and amenities and allows them to have access to more jobs, especially in a region that is car-centric like Houston, thinking about how do we locate jobs closer to workers or workers closer to jobs and how do we match the two is an important part of the affordable housing conversation."

Only two general population projects were actually awarded the tax credit in 2017 in Harris County: an 80-unit development centrally located east of downtown that requested roughly $1.48 million in housing tax credits and a 135-unit project on Ella Blvd. outside the Loop that requested some $1.5 million in housing tax credits. "When we think about the balance, it's somewhat represented in the way the projects were awarded," said Nostikasari.

Other findings from the report:

• As of September 2016, the 126 competitive, general population LIHTC projects in Harris County are located in just 11 percent (approximately 88) of the county’s census tracts.

• Under the 2016 QAP, areas qualified to receive the maximum Opportunity Index points were located in 148 census tracts, but existing LIHTC units were found in only four of those 148 tracts.

• General population LIHTC properties that received the most competitive nine percent tax credit up to 2016 were mostly located in lower-income areas and outside the inner loop, concentrating some of the most economically disadvantaged people in areas with poor access to jobs and transportation.

• In Harris County census tracts with existing LIHTC properties of all categories, the subsidized units represent approximately twenty-four percent of all available multi-family units. Nine percent LIHTC units cluster in tracts where they make up an even higher proportion of multifamily housing stock.

Read more here.

Leah Binkovitz


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